Economist: St. Luke’s deal must happen

A health care expert urged a federal judge to let St. Luke’s keep a Nampa medical group.

adutton@idahostatesman.comOctober 16, 2013 

  • WHAT YOU NEED TO KNOW

    The Federal Trade Commission, the Idaho attorney general, Saint Alphonsus Health System and Treasure Valley Hospital are suing St. Luke’s for its acquisition last year of Nampa-based Saltzer Medical Group, which employs dozens of doctors. The plaintiffs accuse St. Luke’s of breaking laws that protect competition, claiming the buyout gave St. Luke’s control of almost 80 percent of the primary-care market in Nampa.

    The two sides are arguing over several points, including how far patients travel for health care, whether St. Luke’s truly needs to own Saltzer to accomplish a medical-pricing overhaul, and whether the St. Luke’s-owned Saltzer doctors will send patients only to St. Luke’s providers, harming local competitors.

Idaho’s largest health system, which employs hundreds of doctors, must grow larger to make any big strides toward lowering health care costs in Idaho, an economist testified Tuesday in the antitrust trial against St. Luke’s Health System.

Alain Enthoven, a retired Stanford University business professor who focuses on health care, testified as an expert witness for St. Luke’s, which was sued by rivals and the state and federal governments over its purchase of what had been Idaho’s largest independent physician practice, Saltzer Medical Group.

“St. Luke’s wouldn’t die without them,” Enthoven told U.S. District Court Judge B. Lynn Winmill. But its ability to become an integrated, efficient system is hindered if St. Luke’s cannot own Saltzer, he said.

St. Luke’s is hoping to convince Winmill that it is on a path to achieving lofty goals — better health care at a lower cost — but needs to own Saltzer to accomplish those goals.

Its plan includes a new health insurance contract that is intended to allow St. Luke’s eventually to receive rebates from premiums unspent because of efficiency savings. That money would be passed on to high-performing doctors as a reward, St. Luke’s officials say.

The buyout would have other positive outcomes, Enthoven said.

“I think if St. Luke’s can carry out their plan, that will have a very big competitive impact in Idaho,” he said. It could prompt other Idaho health-care providers, including rival Saint Alphonsus Health System, to “form a defensive alliance against St. Luke’s, and then compete ... (based on) better quality and lower cost,” he said.

Two health systems now dominate the Treasure Valley market. The Saltzer deal has increased the primary care market concentration in Nampa — how much so, and whether Nampa is its own market, is up for debate.

Winmill asked Enthoven if he believes market concentration is a concern, but that health care industry problems are “critical enough that perhaps risks need to be taken” anyway. Enthoven said yes.

St. Luke’s is paying Enthoven $600 an hour for his work, not contingent upon winning the lawsuit, according to Enthoven’s testimony.

Enthoven was on the stand for the entirety of Tuesday’s six-hour session, which focused partly on how many doctors St. Luke’s should have on its payroll. Enthoven said full-service, integrated health care systems need 60 primary-care doctors for every 100,000 people in a community. Not all of them would need to be employed, he said.

He cited several studies showing that independent doctors and loosely aligned medical organizations give patients worse care.

He said St. Luke’s needs more doctors with financial ties to the system to abandon a status quo that drives up costs with poor or needless care. As things are now, health care providers earn more if they fumble lab tests, perform unnecessary surgeries or allow people to develop chronic illnesses, he said.

Under today’s fee-for-service payment system, hospitals including St. Luke’s now have a strong incentive to keep “heads in beds” — admitting patients for costly hospitalization — and no incentive to keep people healthy, because people with serious chronic illnesses are the “geese that lay the golden eggs” of revenue, he said.

Attorneys for the Federal Trade Commission and Saint Alphonsus sought to poke holes in Enthoven’s testimony. They suggested that Enthoven:

• Had little experience doing data-heavy research of his own.

• Relied on studies that were several years old and that raised concerns about physician buyouts raising prices.

• Failed to fully examine Idaho’s health-care marketplace to see if St. Luke’s initiatives are already being tried by other organizations.

WHAT’S NEXT?

Testimony continues Wednesday, when St. Luke’s attorneys plan to bring in a board member to explain the system’s decision-making process, among other things. The trial will, originally scheduled to end Friday, will run through Monday to make up for a one-day hiatus last week. Closing arguments are scheduled in November.

Click here for more coverage from the trial.

Audrey Dutton: 377-6448, Twitter: @IDS_Audrey

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